Pimco’s El-Erian: Policymakers Will Keep Markets Nervous

Pimco CEO and co-CIO Mohamed El-Erian says global markets again find themselves in the uncomfortable back seat of a car driven erratically by policymakers.

However, all will not be lost if President Obama a credible package of fiscal reforms that captures the imagination and confidence of a majority of Americans, the Fed delivers on widespread expectations that it is able to materially influence economic outcomes for the better, the European Central Bank continues to offset the persistent shedding of private holdings of Italian and Spanish bonds and the Greek government counters the threat of an October debt default.

"This list speaks to how (and why) top-down issues are still important drivers of markets — and will continue to be so," El-Erian writes at CNBC.

Mohamed El-Erian
(Associated Press photo)

"It is not a comfortable place for markets given the recent history of recurrent policy shortfalls and debacles. Yet it is also reality for now."

If policymakers deliver, they would help unleash the hiring and investing power of a corporate sector that still benefits from cash-laden balance sheets, favorable debt profiles, and healthy income statements, says El-Erian.

"If they fail and, in the process, resume their dithering and bickering, it is just a matter of time until America's unemployment crisis worsens further, Europe tips into severe recession and greater financial instability and, as a result, millions more suffer around the world."

The New York Times reports that administration officials say President Obama will unveil a deficit-reduction plan that uses entitlement cuts, tax increases and war savings to reduce government spending by more than $3 trillion over the next 10 years.

Pimco CEO and co-CIO Mohamed El-Erian says global markets again find themselves in the uncomfortable back seat of a car driven erratically by policymakers.
However, all will not be lost if President Obama a credible package of fiscal reforms that captures the imagination...